Medical Device Daily Washington Editor

WASHINGTON — The annual report to Congress by the Medicare Payment Advisory Commission is usually a mixed bag, and yesterdays' hearing in the health subcommittee of the House Ways and Means Committee proved no exception to the rule. Glenn Hackbarth, the MedPAC chairman, made it clear that the MedPAC consensus is that some providers operating in Medicare, including home health agencies, are due for a financial haircut. However, Hackbarth also said in a discussion that there is no reason to believe that low Medicare payments to hospitals under Part A are driving up payments for private payers.

The opening statements of the committee chairman and the ranking GOP member delineated the battle lines in the healthcare reform debate. The committee's chairman, Pete Stark (D-California), opened the hearing by stating, "too often we hear providers say they can't sustain a market basket shave" adding that "its good to have MedPAC to tell us how high their margins are." Stark made a point of flexing his committee's legislative muscle, stating that "delivery systems reform begins here" and that "Medicare can't do the job [of reform] on its own."

Stark also reiterated a point that congressional Democrats seem certain to hew to in forging a bill for healthcare reform with the observation that a public plan option for non-Medicare citizens is essential to drive private reform.

Rep. Wally Herger (R-California), the ranking Republican on the subcommittee, took an alternate tack, stating that the Medicare cost dilemma "illustrates why we must approach reform carefully" based on the premise that "the federal government has often shown itself to be incapable" of administering programs appropriately. He noted that margins by "home health agencies have averaged 16.6% since 2002," and that CMS has "overpaid freestanding nursing facilities by more than 10% over the past two years."

Herger also argued that diagnostic imaging services "are twice as high as they need to be," and commented on a recent report to Congress by the Office of Inspector General at the Department of Health and Human Services which states that "a lot of career criminals" have moved into Medicare fraud.

Herger added that "Medicare significantly underpays physicians and hospitals," and made the case that "it isn't rocket science to figure out that someone else is carrying Medicare's water," naming private insurers as the affected party. "Those with private insurance are paying $49 billion each year" to hospitals to support Medicare, he said.

Herger urged that Democrats "consider the significant problems with the Medicare program before forcing Americans ... into a government run program." "Let's focus on areas where we can find agreement," such as going after "waste, fraud and abuse," he urged.

In his opening statement, Glenn Hackbarth, the chairman of the Medicare Payment Advisory Commission, said "Medicare is the indispensable part of American healthcare" but is "unsustainable in its current form." He called for "restraint in payment increases," but added that "in particular we must invest in rebuilding" primary care, which he said is "essential for a high performing healthcare system.

"Our current system is not only expensive, but it can be dangerous" due to lack of coordination of care, Hackbarth said, adding that reform "is controversial" because there are winners and losers. This fact, however, "must not deter us from the task," he said, because "the alternatives are higher taxes" and poor economic growth.

Hackbarth said that the 2009 MedPAC report "recommends rate increases for hospitals and physicians" but recommends payment freezes for nursing facilities and rehab facilities, and payment cuts for home healthcare entities.

Hackbarth took the position that miserly Medicare payments to hospitals are not driving up private payer costs. He said, "overly generous private payments drive up costs, and that flows through and affects the Medicare system." He supported his stated position by saying that hospitals that rely principally on Medicare Part A do better where cost control is concerned. "Their costs are significantly lower," by about 10%, Hackbarth testified, than hospitals that make most of their money from private payers.

"The problem is not that Medicare pays too low," Hackbarth asserted. "In order to be able to shift costs ... to private insurers, hospitals would have to have [purchasing] leverage," a phenomenon he indicated he does not see. Conversely, "it's not clear to me that higher Medicare rates would lead to lower rates for private insurers," he remarked. Regarding a recent report that argues that the CMS accounting system fails to capture all the true costs of Medicare, Hackbarth said that "some say it's not apples to apples," but he held his ground all the same.

"We believe Medicare rates are adequate" for hospitals, a position Hackbarth said he would hold even if private payment rates were the same. He said MedPAC is concerned about patient use of high-cost settings such as long-term care hospitals "when they could get equally good care and equal results" in another setting. MedPAC, he said, is of the opinion that CMS should be empowered to set standards for admissions to various sites of care.

Of comparative effectiveness, Hackbarth said, "we need research to make better decisions," stating that new technology sometimes slips through without a thorough review of the cost and benefit. "What we need is information on effectiveness.

"We all sympathize with concerns about rationing," Hackbarth said, but noted that "we're all also taxpayers ... and we're all grandparents. So as we think about this ... we need to reflect the patient perspective, the taxpayer perspective and the grandparent perspective."

No Comments